The Autistic Intelligence of “Free-Market” Economics

28122010

Autism: a disorder of neural development characterized by impaired social interaction and communication, and by restricted and repetitive behavior. – Wikipedia.

Autistic Economics: a situation where one theory, that illuminates a few facets of its domain rather well, wants to suppress other theories that would illuminate some of the many facets that it leaves in the dark. – Post-Autistic Economics Network

The Problem: Markets are Incomplete as a Steering Mechanism

The received economic theory and embodied socio-biological system by which humanity lives today will not solve the larger ecological issue of our time, which is how do we live sustainably on this finite biophysical planet. A pricing system of ‘free markets’ coupled with an ideology of hyper individualism will now begin to extinguish not only human civilization, but much of the biosphere as well.

Such a system, so conceived, has led to unprecedented material welfare the world over, there is no doubt. Yet, it has been clear for some time that money-based free-market pricing is adaptive only moderately and in constrained situations. As recent economists such as Joseph Stiglitz and Nicholas Georgescu Roegen have demonstrated – for at least 50 years now – there is never a genuine, inter-generationally neutral valuation of resources, human time, merchandise, services etc that arises from money based prices. Even with some attempt to deliberately take into account buyer-seller asymmetry of information, cross subsidies, externalities, and monopolistic pricing and production – the four failures of markets to which the received economic theory admits – all prices and values are arbitrary. Georgescu Roegen calls prices “parochial.” The pricing system is not a reliable steering mechanism.

Individualism is a False God

More pernicious and troublesome to our human predicament today, however, is our collective, neurotic belief in individualism. I am talking in particular about American culture, where the individualist psychology creates a culture of predatory capitalism where exploitation of children, sick people, elderly, animals and the environment is considered routine and acceptable business practice. Historically, America has been the land of opportunity. People from all over the world have immigrated to it in order to leave the oftentimes oppressive, unfree and impoverished homelands of their ancestors; and to seek and build their own fortunes in this open, resource rich and “pro-business” nation state. What has transpired here over several generations, and now amplified by its apparent “triumph over communism,” is a self-perpetuating belief of constitutional libertarianism, that lives psychologically in practically every man, woman and child who grows up here.

This psychology, while in the past it may have served some “developmental” purpose, it is now completely at odds with the survival of our and other species of beings. In a nutshell, the nugget of American free market individualism, to which academic economists give lip service, is the lonely person whose view of life is strictly of self and self interest. His or her emotional, affective world is reduced to ego and egoistic advantage. His entire universe of feeling is reduced to, in the words of psychiatrist Trigant Burrow, “social adaptation in the light of personal and social gain.” All relationships, even intimate ones, are opportunities for self gain. In America today, pursuing one’s livelihood, engaging with others and with society is a solitary game of manipulation and exploitation.

Furthermore, as Burrow also identified, “in this artificial gauge of conduct measured by standards of personal advantage there has established in the individual a criterion of life that rests upon an unwarranted assumption of personal supremacy and absolute privilege.” “Each of us is an unconscious overlord striving to secure the supremacy of his own personality.” (p. 24…29?, Social Basis of Consciousness, Burrow) Through this neurotic distortion of life abetted by the American cultural belief in libertarianism there becomes this inflexible assumption of personal absolutism and autocracy. Every adult American is a petty tyrant. Each person is utterly self centered and autocratic.

It would be merely ironic, if it were not now catastrophic, that this orientation is emblazoned in a philosophy of political economy called “Neo-liberal” and “neo-classical” theory. This theory, espoused by such folks as Milton Friedman, Ronald Reagan, Alan Greenspan, Chicago economist and Nobel Laureate, Robert Lucas, the Bush/Cheney/Gerstner syndicate, even domestic terrorist Timothy McVeigh considers money and markets, coupled with extremely self-centered, sociopathic individuals to be a steering mechanism for society as a whole. It is social Darwinism dressed up as moral norm. Dog eat dog, trust is for fools, he who has the most toys wins, government is the problem, he who has the gold sets the rules, might makes right. What started with Reagan’s famous comment in 1980, “government is the problem,” climaxed in 2006 when Vice President Dick Cheney sneered, “So?!” when ABC correspondent, Martha Radditz pointed out that most Americans were against the war that his administration started.

At that moment, the Vice President of the United States needed no longer hide his contempt for democracy. His personal victory and ideological triumph were complete. His game plan was right in line with the hyper individualism, Social Darwinistic doctrine of our day: Get “elected” to office, pillage the public sector. When self interest is everything and public interest is a laughable nothing, then attaining absolute power and exploiting people by the millions is simply rational. By Cheney’s thinking, you would be stupid if you did not do this.[1] By the end of his term, 2008, the country was in ruins – overextended by adventurist war to the tune of trillions of dollars (to future taxpayers) per year, and freefalling into a financial collapse from which will probably take a century to recover. Needless to say, the reforms that will resolve this climax of the doctrine of self interest are beyond Cheney’s comprehension.

Not only is the external system of markets and money-calibrated exchange and investment incomplete, but the internal psychology of individualism is misguided, delusionary, and dangerous.

Markets Do Not Determine Right Scale

The free-market pricing system is not a generic problem-solving device that allows human culture to find a ‘natural dwelling’ in balance with the rest of the earth. Its ability to adapt human needs and physical options is adequate only in narrowly proscribed situations. It works in some places, but despite its widespread popularity among American economists and the American people in general, it is not going to solve our ecological problem of scale. Finding “right scale” – how big the human “footprint” should be – will not be achieved through the free-market system alone. Other forms of human communication and deliberation must be used as well (more here about this: ) At best, the market as an economic mechanism is incomplete.

The classical/neoclassical theory of markets and prices, which has been operative since Adam Smith, has also been wrong about social inequality and poverty. But, as many have pointed out (such as Herman Daly), with steady economic – physical – growth over the past couple of centuries, the errors of the theory around inequality were mitigated. As long as everyone’s boats floated higher, it didn’t matter so much that inequality kept growing.

Now we are reaching the upper limits of physical impact that the human species can have on the earth. Over the next 40 years, if the human population doubles as demographers expect (see Exhibit 1), and these beings intend to attain a material standard of living equivalent to the USA (see Exhibit 2), there is no way this earth will sustain such a move without catastrophic alteration of itself. Nonetheless, with our free-market-pricing logic, we are driving headlong into this future.

Exhibit 1

Exhibit 2

Source: Angus Madison

CHARTS TO COME

By our conventional economic wisdom, particularly the free-market, money-calibrated pricing system, we will deplete all non renewable resources like oil and coal, and along the way, we will extinguish many if not most animal and plant species (so called “renewable resources”). A pricing system figures into this in only, as economist Nicholas Georgescu-Roegen would say, a “parochial” way. No matter how scarce and therefore high priced these dwindling animate and inanimate things become, the simple fact of large numbers of human mouths will wipe them out. And, as an artifact of the money and market-priced system, ever-widening personal income disparities will generate some persons and corporate entities who CAN afford to purchase these very highly priced items.

To be clear, the intelligent and needed schemes, such as cap-and-trade systems or intergenerational equity schemes, are not strictly market systems, even though they may use markets for key parts of their process. In these systems, the upper limit of resource use, i.e. the right scale, is determined prior to the market process – by political debate and scientific consensus. The “cap” level is not a money-auction result. The cap quantity is, for example, the total amount of carbon to be allowed into the atmosphere; it is the total number of fish to be taken in one season; etc. These upper quantities are determined by stakeholders in deliberation. Rights to produce within that determined quantity is allocated by a market auction, but not the level itself. Strictly speaking, the process for managing resources with these schemes is outside of the so-called autonomous system of prices and interconnected markets. Thus, our “steering system” has extra-market devices and they are other than market competition.

The neo-liberal vision does not want to recognize this. It wants everything to be market driven.

Economy is a Communication Process and Markets Serve Only One Kind of Communication

The deliberation required to set and design the right scale of our human habitat is not widely recognized as categorically separate from the market process. Until this is recognized, and until the dynamics of that deliberative process are better understood and integrated with market activity, our world civilization will not have a generalized steering device concerning its economic actions. Indeed, the steering process we believe ourselves to possess – individualistic, self-serving action mitigated by competition – will make things worse. Prices and markets do perform adaptive functions here and there. But it is wrong to consider the pricing system as sufficient unto itself. Given the mandate to steer us collectively to right balance with the earth, the economic theory of free-market prices is glaringly inadequate. It won’t get us there.

Now, one of the virtues of the received neoclassical theory of economics (what I’ve been also calling the ‘traditional theory’ and ‘conventional wisdom’) is that it conceives itself as a communication system. This is true. Frederick Hayek wrote a wonderfully lucid piece in 1945 about how an economy of prices and free markets enables a society to manage its limited materials in the most adaptive and responsive way. Hayek’s statement as to how knowledge is used by and is distributed throughout society by thousands of independent budgetary decisions informed by market prices – a wholly decentralized process – is essentially a recapitulation of Adam Smith’s insight of the “invisible hand.”

Prices and markets perform an information processing function. What I am going to put forth in this essay is that markets are a specific instance and kind of communication, “information processing” device. Not only do we need other kinds of devices, but we need to articulate a broader, more general conception of communication in order to see new possibilities of a general steering device for spaceship earth and species being of homo sapien.

Communication and information processing is the solution to our ecological and social problems, to be sure. It is just not only with prices and markets. There is a more comprehensive manner of communication that will be the solution. In this essay, I attempt to articulate this more general conception of economy as a communication process.

Economics – both from theoretical and practical knowledge interests – needs a more comprehensive view of communication beyond the market and pricing system. This broader conception, as I will attempt to demonstrate, shows up most conspicuously (from the standpoint of traditional economics) as two new domains: the domain of intersubjective knowing among people (including science, deliberation of many kinds, culture, education, enterprise management, and so forth) and the domain of intrasubjective knowing – individual consciousness aka self consciousness, self actualization, etc. – as constituted in conversation.

Making this expansion of economics as communication requires an epistemological shift out of Cartesian duality toward what is being called a participatory epistemology. The characteristic of participatory knowing is that the awareness, whether individual or group, is part of a process of unfoldment. Objective detachment and rationality of the knower is never completely possible. There is always a quotient or component of indeterminacy, uncertainty, unconsciousness, and ambiguity. The individual person is sentiently dealing with a whole field of dynamically changing relationships with other persons and things. There is never an all knowing “God’s eye view” for the individual nor group. Any rational objective assessment that does happen, is more of a snap shot in time. Rational behavior in either markets or the broader economic process is not only “bounded” (as Nobel economist Herbert Simon suggests) but is only a stepwise, punctuated static fractal image, so to speak, of a much bigger chaotic, indeterminate and overdetermined process. How the human should “be” in this – including his or her action – will never be adequately conceived by a theory that subscribes to the Cartesian duality of subject-object. Cartesian duality, while valuable in many ways, is ultimately blind as a critical guidance of action in and engagement with the world. Another mode of awareness, complementary to the Cartesian mode, is needed. It is characterized as lucidity, intuitiveness, participation-in-process, non-duality.

The Solution: Conscious Economics

How we understand economy, at individual and collective levels, and in theory and practice, is what is critical for our finding our appropriate ecological footprint on the earth. Consciousness needs to be put squarely into it. Two critical aspects of consciousness here are the personal, which amounts to self observation and emotional maturity, and group, which amounts to cultivating a public receptiveness to pluralism, empathy and compassion.

The field of behavioral economics, although explicitly psychological, is not “conscious economics.” Too often, its unexamined intentions are how to get more productivity out of people; how to more cleverly market consumer goods to people; how to harvest capital gains in asset markets ruled by mob psychology; and so forth.

A conscious economics, stemming from a non-dual, participatory epistemology will lead to a completely reconstructed economy-ecology because it explicitly incorporates human intersubjective dimension (including how one shows up in conversation with others) as well as mindfulness of the individual, observing his or her own internal narratives and conversations. Once these interior depths and transpersonally emerged identifications are accepted into economy, then a much greater adaptability, power, and grace is possible.

[1] The Carlyle Group, Cheney and Bush’s investment firm, is one of the largest private equity firms in the world. Josh Kosman describes these firms as predatory. See “Private Equity: The Buy Out of America.”